CBDCs: Digital Dollar Project Launches Pilot with Western Union Focused on Cross-Border Payments

The Digital Dollar Project announced the completion of a pilot study conducted in collaboration with The Western Union Company, BDO Unibank, Inc. (BDO Unibank) in the Philippines, and support from Accenture.

This collaboration represents the Digital Dollar Project’s latest private sector efforts “in support of the exploration and experimentation of a central bank digital currency (CBDC) in the United States.”

Amidst an ever-evolving international payments landscape, retail cross-border remittances serve as “a critical lifeline for millions of family members and loved ones worldwide who receive payments from US-based customers.”

The pilot study, executed in concert “with a leading, technology-driven global payments player, evaluated the potential benefits of utilizing CBDCs for cross-border remittances.”

Participants designed and configured a platform “leveraging distributed ledger technology (DLT) to simulate the payments infrastructure necessary to transfer digital dollars to Philippine pesos.” The findings have been published “in the Digital Dollar Project’s whitepaper, ‘Retail Cross-Border Remittance Payments.’

Jennifer Lassiter, Executive Director of The Digital Dollar Project, said:

“As conversations around CBDC and a ‘digital dollar’ mature, this cross-border payment pilot is a timely step towards understanding the impact and generating highly-applicable data for retail CBDC use cases. With the support of Western Union and other DDP partners, we will continue to generate the needed research and data to map feasible, real-world use cases that speak to financial institutions, policymakers, and technological partners.”

As the role of digital money transfers grows, Western Union is innovating “to meet new patterns of consumer demand and continuing to embrace and implement advanced technology systems.”

Unlike private cryptocurrencies such as Bitcoin, “a U.S. CBDC would be issued and backed by the Federal Reserve, just like U.S. paper dollars and coins.” A U.S. CBDC could ensure a more secure and reliable transfer of digital money “for individuals and their families, who often rely on fund transfers to meet basic needs.”

Kevin Mole, Global Head of Digital Assets at Western Union, said:

“Through this pilot study, Western Union has identified several advantages for customers and financial institutions, laying the groundwork for ongoing evaluations of the feasibility and viability of utilizing retail CBDCs for cross-border remittances.”

The key benefits highlighted throughout the study include:

  • Reduced Risk: Instant settlement across multiple currencies reduces counterparty and credit risk for customers and their financial institutions.
  • Optimized Cost: CBDC settlement allows for transferring value and message in a single transaction, settled atomically, thereby reducing the cost of capital held in pre-funded accounts.
  • Enhanced Customer Experience: A digital dollar increases the accessibility and portability of money in a digital form to benefit the unbanked and underbanked. A verified digital wallet can help reduce fraud, enable faster settlement, harmonize jurisdictional requirements, and minimize failed transactions.
  • Improved Visibility: Using a permissioned ledger provides institutions and their customers with enhanced transaction visibility, bolstering customer trust.
    Results from this pilot study serve as a foundation for future experimentation, defining the essential elements of a cross-border remittance within a DLT context, including CBDC Issuance, Transaction Management, Hosted Customer Wallets, and Currency Exchange. Additionally, the findings will provide government agencies with the design elements necessary for scaling a potential U.S. CBDC in real business contexts.

The DDP is committed to “providing the federal government, policymakers, and private sector organizations with a stronger, clearer picture of what implementing a CBDC in the U.S. would look like and answering essential questions of what a roll-out might entail across retail, wholesale, and international use cases.”

Sponsored Links by DQ Promote



Send this to a friend